In his keynote address at XeroCon 2015 yesterday, Xero CEO Rod Drury said his company’s goal was still to grow small businesses through software, advice and connections, because it is the only part of the economy that can grow to improve youth employment, fund better hospitals and by implication pay for all the other things we want as a society.
"Small business is big, big numbers," he said, covering 90 percent of companies and 85% of job creation. But it is also relatively unproductive.
SaaS provides these businesses with affordable access to the technology that can change that, and in some ways small businesses now have better technology than enterprises do. That reduces the administrative and compliance load, and a 'financial web' can reduce the costs of trade.
For example, the data being aggregated by Xero can improve the flow of capital to small businesses by connecting to banks, non-bank lenders and investors.
The data is increasingly 'untouched by human hand' thanks to direct bank feeds, the bulk input of transactions from large businesses, and transactions that flow from one Xero customer to another, and "under this model, we know that things are true." This provides an opportunity for accountants to provide continuous certification of their client's position rather than relying on audits. Xero will work on this issue with banks and the accounting and bookkeeping institutes, Drury said.
This situation would make it easier for institutions to lend to small businesses - some currently require borrowers to have at least $5 million turnover - and there is an opportunity for accountants to earn a commission by introducing their clients to lenders, he said.
NAB executive general manager digital and direct banking Adam Bennett said the direct link between the bank and Xero had proved popular, and the two companies were now looking at a lending feature that would allow businesses to use Xero to determine their borrowing requirements and provide documents to NAB in support of an application.
"We're thrilled that NAB gets this stuff," said Drury.
Connections between Xero and other services are being forged.
Towards the end of 2015 an add-on will make Veda credit scores available within Xero, helping businesses decide whether a customer deserves (more) credit. There is also the possibility of providing Veda with your business's payment data from Xero to show that you do pay promptly, and by implication one that others should be happy to do business with.
Work is underway on a connection between Xero and Gmail so relevant emails are visible from inside the accounting software, and so that emails can be linked to particular records.
Looking further ahead, Drury spoke of a goal of "having the machines doing the work," so that the arrival of a payment from a customer could trigger payments to suppliers, or alerting the owner or manager when an employee's work anniversary was approaching.
Xero Australia CEO Chris Ridd picked up the theme of the financial web, saying that integrations were coming with services in the areas of foreign exchange, mobile POS, mobile payments, working capital, insurance and cashflow solutions.
Xero is becoming the hub for small business and the financial web, said head of strategic partnerships Ben Styles, as it has the most data and is the easiest system to connect with. Furthermore, “we’ve stayed very focussed on accounting,” preferring to partner with other organisations to build out the functionality.
Moula is using access to data stored in Xero to help provide almost instant approval of borrowing requests and to help price risk, OzForex provides an embedded system for making payments in foreign currencies (at “market leading rates” and with no fees for Xero users, OzForex chief operating officer Jeff Parker said), and CGU plans to use Xero data to dynamically adjust insurance cover (eg, when stocks are low, less cover is needed) and match premium payments to cash flow (collecting a bigger share of the premium when business is good, and less during the quieter months).
Customers are happy to share their data if you use it responsibly and they get value in return, said Peter Harmer, chief executive of IAG Labs (CGU is a subsidiary of IAG), and Styles stressed that Xero users always have control over whether any particular partner can access their data.
Among the statistics presented at XeroCon:
Xero has 540,000 paying customers, 248,000 of them in Australia.
Xero processed 215 million invoices in 2015, and a total of $331.6 billion in transactions.
The most popular add-ons in Australia include:
The company has grown to 1200 employees.
Disclosure: The writer holds NAB shares.